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Technology > Investment Platforms

Crossing the Digital Divide

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New years are customarily accompanied by resolutions — and United Capital’s Joe Duran recently gave advisors three years’ worth. “We are in one of the most disruptive times for business in the world that we have ever seen,” Duran, CEO of United Capital, told advisors in early December, advising them in his quietly passionate way that if they failed in the next three years to embrace the digital disruption ahead, they’ll be done for.

“If we think that three years from now we can keep operating the same way, I’m here to tell you that you won’t be growing if you do,” he told attendees at the MarketCounsel Summit in Miami Beach.

“The greatest thing about disruption is that the old ways of working no longer work, which means there are massive opportunities for new ways of working — and your competition is as lost as you are.”

Advisors, he proclaimed, have a huge opportunity to grab market share “if you can figure out how to do things differently.”

He suggested that to still be relevant in three years’ time, advisors will not only have to change how they interact with clients, but also how they deliver and charge for their services, while also ensuring they’re delivering a myriad of investing options.

The merging of technology and people, Duran maintained, “is going to be how you win. I call it the bionic advisor; it’s like being Ironman. You can no longer be a human and compete” against another human who “has the machinery […]; we are all going to have to be machine-powered but human led.”

While everyone is feverishly focused on the millennials as the tech-savvy generation, Duran went against the grain in arguing that it’s actually Gen Xers — or “the bridge generation,” as he called them — who will indicate what will be successful in the tech/business realm.

Gen Xers’ children teach them how to use today’s devices (iPhones and iPads) as well as social platforms like Facebook and Instagram, but when Gen Xers adopt a new technology and a “new way of operating, they automatically teach their parents,” Duran said.

While millennials will continue to be the “early adopters,” they are not the generation “who will predict what’s successful. Uber, Amazon, Facebook; they were only successful when my wife started using them, and we all started to consume them, not when my daughters started to use them,” he argued.

The technologies “that make money and last are the ones that we [Gen Xers] adopt,” he added, stating that the primary goal for Gen Xers who have kids in high school or college and parents who are just beginning to leave the workforce can be summed up in one word: convenience.

“The way that we interact with the world will change simply because of the convenience alone,” Duran said.

Lessons From Silicon Valley

Relating what he has learned during one of his frequent visits to Google, Amazon and Facebook (his firm is headquartered in Newport Beach, California), Duran recalled the past “broadcast” age of information that relied on television to deliver the news. Next was the “age of information,” in which Gen Xers grew up with access to information “whenever and however they wanted it” with the internet allowing for such access and consumption.

Today, he continued, we’ve entered the “great age of participation, where news is created and shared by us.”

The mindset “has shifted in every single industry — Starbucks, Nike or at any bank — and what everyone is doing is empowering consumers to participate in the experience.”

Duran encouraged advisors to understand how their target markets consume information, noting that while advisors’ biggest competitive advantage is their geography — the convenience and location to their clients — that will cease to become a competitive advantage over the next few years.

Instead, advisors’ presence needs to be “omnipresent, everywhere,” with clients wanting 24-hour access to advisors’ services. Duran said that the notion of telling clients “‘I’ll take your call between 9 and 4 pm,’” or expecting them to come into advisors’ physical offices are “antiquated” ideas.

“If you’re not on your clients’ cell phone, if you’re not one of their top five visited sites and the No. 1 financial site they visit, you will be irrelevant,” Duran stated. “Crossing the global divide is the secret between failure and success, and it is inescapable. It will be true first for your clients who are 40 or 50 and it ultimately will be true for your clients who are 70 or 80. If you are not resident and native on their phone or on their iPad, you will not be relevant.”

Advisors Behind in Digital Strategies

Duran’s warning bell for advisors is certainly timely. The Fidelity 2016 advisor benchmarking study, released in mid-December, found that a good portion of advisors aren’t taking their digital strategies seriously.

Investment management, the Fidelity study pointed out, “continues to be commoditized, in part driven by the rapid rise of robo-advisors who are often charging far lower fees. Despite this, traditional RIA firms are still slow to embrace digital models.”

Fidelity’s online survey of 402 RIA firms found that:

  • More than half of firms (54%) do not have any digital strategy and do not intend to develop one.
  • Less than a third of firms (29%) plan to learn more this year or next, and develop a strategy.
  • Only 19% of firms indicated that they plan to deploy digital strategies to increase efficiency.
  • Only 18% of firms indicated that they plan to deploy digital strategies to grow with small clients.
  • Virtually no firms (4%) said they plan to launch a separate digital business.

Speaking before the release of the Fidelity survey, Duran said elements of the advisory business “that can be digitized and scaled are being digitized and scaled, starting with the investment side,” with firms like Betterment, Wealthfront, Vanguard and Charles Schwab and their robo-offerings. (Schwab, in fact, released on Dec. 13 a new robo-offering.)

These firms, Duran reported, are “taking the investment side of the house and saying, ‘If you only need a one-size-fits-all solution, we can do that for 15 to 25 basis points.’ In Schwab’s case, they can do it for free.”

Citing a recent op-ed by famed theoretical physicist Stephen Hawking, who wrote that “we are at the most dangerous moment in the development of humanity” because “artificial intelligence will wipe out jobs like we’ve never seen — changing the way every single industry operates,” Duran pointed out that the human touch will always be needed.

“Why can’t we just do everything by machine?” he asked. “It’s very simple — the complexity and the cost of being wrong are too high when it comes to money.”

Advisors’ role is to provide “perspective, empathy and then discipline,” he argued, not to pick investments or beat the markets. Yet “we tell our clients that’s what we’re there to do.” Duran said that by contrast clients come to advisors for two reasons: to give perspective that is accurate and reflects their world when they have big choices to make, and to “talk them off the ledge when they’re going to do something stupid.”

They also want advisors to “give discipline to the way they make choices,” which he said will never change because “we want someone to blame. The truth is, we don’t want to go it alone. We want to be able to call someone and scream at them if it doesn’t work. That’s a huge asset. It’s not going away.”

Duran also challenged advisors to reassess their investment strategies. “If you’re going to be competitive with Vanguard, your investing world has to be different,” providing multiple strategies. “You have to be able to give the husband one thing and the wife another if that’s what’s needed,” he said, adding that advisors are “going to have to have a stable of investment solutions,” not just index funds, for instance.

Advisory firms’ “planning needs to be constantly updated,” he said. Advisors’ advice (he defined advice as “where peoples’ life meets their money”) — is where advisors “should live. We have to show that our guidance is improving people’s lives.”


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